Former Valeant and Philidor Executives Charged

18.11.2016 -

US federal prosecutors in New York’s Southern District have arrested a former executive of Canada-headquartered Valeant Pharmaceuticals and the former CEO of the erstwhile mail-order pharmacy Philidor, based in the US state of Pennsylvania, on several counts of fraud. The case made public on Nov 17 is the latest in a score of inquiries into the US-managed company that has been under scrutiny for its strategy of using the pharmacy to falsify sales and drive selling prices. While the charges are the first to be brought in investigations carried out at both state and federal elections, observers believe they are unlikely to be the last.

Valeant has been under severe pressure for more than a year as case by case throws light on its business practices. CEO J. Michael Pearson stepped down in March of this year. In the most recent prior announcement, the California Department of Insurance said last week it had issued a subpoena against the company over its dealings with Philidor. The Securities and Exchange Commission is also conducting an investigation.

In a statement issued in response to the now opened federal case – which exposes a vast thicket of undercover arrangements – Valeant said neither it nor its current top executives had been charged and that it is cooperating with investigators.

Based on information supplied by an undercover agent of the US Federal Bureau of Investigation (FBI), the New York prosecutors said Gary Tanner, who worked for Valeant from 2012 to 2015, entered into a secret relationship with Philidor’s chief executive, Andrew Davenport, under which he received kickbacks totaling $10 million for services rendered and stood to take in even more.

The 28-page paper outlining the charges accuses Tanner and Davenport of establishing Philidor as a vehicle for “alternative fulfillment,” a practice that involves using mail-order pharmacies to push prescriptions for brand-name drugs instead of cheaper generic version.

Tanner held the position of alternative fulfillment officer at Valeant, a similar position to the one he held at Medicis before the company was bought by Valeant in 2012 and he allegedly began collaborating with Davenport. In the collusion, his responsibilities are said to have included promoting the pharmacy’s interests inside Valeant and convincing the drugmaker to buy Philidor. This led to a purchase-option agreement in December 2014.

After Tanner was terminated by Valeant in August 2015, the prosecutors said he was hired by Philidor and was negotiating a consulting agreement to continue working for the drugmaker before the scheme began to backfire. The former executive is said to have used the kickback to fund personal expenses, retire debt and by property. Under the three-year scheme, Philidor grew into an enterprise of 450 employees and tens of millions of dollars in sales before being shut down in January of this year. At that time, at least 90% of the drugs it dispensed were sold by Valeant.